NRI Real Estate and Property Investment in India
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NRIs contribute to slowdown in Hyderabad real estate
Saturday, August 16, 2008

The real estate boom is officially over in Hyderabad and many other cities. The prices of real estate land have fallen in the outskirts and the price of apartments per sq ft has crashed in the past year. A key reason could be the sub-prime real-estate crisis and its impact on real estate abroad has led to several NRI's burning their hands in real estate. Their appetite for real estate investment in India is probably low now. Plus, with the developed nations moving into recession NRI's might be concerned about maintaining their current income levels. Local businessmen and investors are also stuck with their "investments". The lands that they had originally planned to buy and sell in a few months at good appreciation - actually depreciated and most of them could not dispose of their land for nearly a year. Many have forfeited the initial payment on the agreement for sale. Today, this segment of buyers has no appetite for real estate investments.

With stock markets falling from 21K to 15K levels, one of the pillars of wealth creation for the real estate buyers is destroyed. This pillar enabled a number of real estate investors to fund the margin money for buying the properties. This source of wealth may not be available for many years to come. Currently, some financial institutions are in fact advising investors not to invest in stock market for at least 6 months. The current situation will not get any better with a weakening in the earning capacities as well as the sentiment of all types of real estate buyers - NRI's, highly paid employees and domestic businessmen. The future does not seem to be any better with spiraling inflation, lowering growth rate for economy and increasing interest rates. In the early to mid nineties Mumbai (then Bombay) went with a similar boom to a negative correction and the prices took over a decade to come back. It will be interesting to see how the other markets behave with the falling NRI investment.

 

 

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